One of the key steps was the introduction of a legislative limit on loan costs. In May 2024, amendments were made to the Law of the Kyrgyz Republic "On Pawnshop Activities," which established a ceiling for the annual effective interest rate (AEIR). This rate is now calculated using the formula: the weighted average nominal rate of the National Bank of the Kyrgyz Republic plus 12%. According to the regulator, this has practically limited loan issuance to around 30% per annum, ending a period when some players could offer rates from 100% to 300% per annum, as stated in the report.
Additionally, the requirements for transparency in loan terms have been significantly strengthened. Pawnshops are now required to provide clients with complete and clear information about interest rates, terms, and the procedure for calculating interest before signing the contract. It was also emphasized that hidden fees are unacceptable—previously, such issues could only arise at the stage of redeeming the collateral.
Another important aspect of the reforms was the restriction on the transfer of borrower data. According to information from the State Financial Supervision Agency, the regulator limited the practice of transferring information about loans and borrowers to credit bureaus, aiming to protect personal data and prevent the deterioration of credit history due to short-term pawnshop loans. This decision was supported by the Cabinet of Ministers, which, by resolution No. 671 dated November 6, 2024, prohibited the transfer of information to credit bureaus, except in cases where the loan amount exceeds 200,000 soms.
The goal of the reforms, as noted by the agency, is not to "tighten the screws for the sake of formality," but to create a more transparent market: borrowers should understand the cost of the loan in advance, and the terms should not come as a surprise. This should lead to a reduction in the number of conflicts regarding charges, fees, and the return of collateral—these are precisely the aspects that the regulator highlights as areas of increased attention.
